Executives say that Japanese utilities could find a replacement for Sakhalin-2 in the event of LNG supply interruption.
Executives said that Japanese utilities JERA, Tohoku Electric Power Co and Sakhalin-2 can find alternative sources of gas if the flow is interrupted. This comes amid U.S. demands to stop energy imports from Russia.
This month, the U.S. urged Japan and other Russian energy consumers to stop imports as they push the Kremlin toward ending the Ukraine war. Japan's contracts with Sakhalin-2, which are long-term agreements, cover 9% of its imports of LNG.
JERA receives about 2 million tonnes of LNG each year under two contracts that expire in 2026 or 2029. JERA is a major LNG trader. It handles between 30 and 35 million tons per year, both for its own use as well as to be resold elsewhere.
Naohiro Makawa, a JERA executive officer, said that if the Sakhalin supply needs to be replaced "there's a good chance" we'll be able do something, given the JERA's LNG imports and its overall handling volumes. There's also the option of tapping the spot market.
He said, however, that "it is really important to maintain existing long-term contract, not only Sakhalin."
Takayoshi Enomomoto, Tohoku Electric Power's senior executive, said that the company, which imports around a 10th of its LNG, was working to diversify supply to reduce the risk of an abrupt interruption of imports.
Tohoku’s contract with this project expires 2030. Another senior official stated in February that the company was considering a possible halt to Russia purchases. Tohoku could also increase its U.S. Liquefied Natural Gas purchases.
Sanae Takaichi, Prime Minister of Japan
Two Japanese officials told U.S. president Donald Trump that it would be difficult to ban Russian LNG imports during their meeting with him in Tokyo last week.
Japan's Industry Minister said that halting Sakhalin-2 deliveries would be expensive and lead to higher electricity bills. This comes at a time where Takaichi, the government, is trying cut prices for consumers after the cost-of-living has eroded the support of the ruling Liberal Democratic Party.
Japan also buys LNG to meet its emergency needs, a program it could expand in the future for increased energy security.
Support for Alaska LNG is still uncertain
JERA and Tokyo Gas have only announced preliminary orders. While they are committed to various U.S. upstream and downstream projects and U.S. sources of LNG, Japanese buyers are wary about making hard agreements with the $44 billion Alaska LNG project Trump favors.
Maekawa, of JERA, said that the company continues to collect information about Alaska's supply and feasibility.
Enomoto, from Tohoku, said: "It's not clear what the cost of procurement will be... but it's possible there will be positive impacts in terms energy security and diversification of supply." (Reporting and editing by Kate Mayberry; Yuka Obayashi, Katya Glubkova)
(source: Reuters)